As comprehensive financial planning has become more widely adopted, many financial advisors have felt pressure to find new ways to differentiate themselves by demonstrating their unique value to clients. And while providing fee-only advice or highlighting service as a fiduciary may have once been a fair differentiator, these services are now often considered table stakes, necessitating financial advisors to find more creative solutions that show current and prospective clients that they provide more value than other advisors. However, as more advisors continue to increase the services they offer to enhance their value propositions, the new challenge has become balancing the many services offered to clients (who sometimes don’t really need all of the services offered) with enough time and capacity to show up for clients who truly need help with a particular problem.

In our 103rd episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss the challenges of finding an optimal balance between proactively providing value and the consistency of simply being available to respond to clients when they come to their advisor for assistance.

Some advisors increase their value propositions by offering a ‘proactive sledgehammer’ of value by inundating clients with all the things they can do for them to emphasize that they not only have them top of mind, but also that they keep them top of mind all year round. Some advisors implement client service calendars that dedicate certain times of the year to tax planning, insurance reviews, or quarterly meetings, and fill the gaps with newsletters, client appreciation events, and regular firm updates. Others use frequent emails to stay in regular contact, sending reminders or helpful information relevant to their clients. Though these can be good approaches to increase touch points and create value for clients, balancing the frequency of these touch points (and the scope of what clients are offered) with the real value that clients actually need and expect is most important. Because while some clients may appreciate and need more frequent communication, others just want to know that the advisor is there when they need them. And while frequent communication may be important with many clients, it is often the most critical in the early stages of a client relationship, when advisors are just learning about their client’s needs and building trust with the client. However, as the relationship matures, clients may build enough trust in their advisor that they no longer expect (or want!) frequent communication, satisfied in knowing that if any financial issues arise, the advisor will be there to help them.

Ultimately, the key point is that while most clients will appreciate many of their advisor’s valuable services and proactive communication, finding the optimal balance between offering too much and simply being available when needed will depend on each unique client. This begins with understanding their needs (and communication preferences!) and gaining their trust. And building trust early on not only helps advisors develop more meaningful relationships with clients, but also helps them save time as they won’t need to spend as much time offering solutions that they know won’t really matter to the client. Which means the advisor will end out with more time to focus on providing better – and more relevant – service with the capacity to be available when a client truly needs it!

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For the better part of a decade, the financial services industry has anticipated the coming of fee compression, mainly due to the rise of robo-advisors offering low-cost automated wealth management services. Yet even though fee compression has not been fully realized to the extent the industry has generally expected, lower cost robo-advisor services have still compelled financial advisors to maintain relatively low fees. But when advisors continually add services as a means to differentiate themselves from other advisors, keeping fees low can prevent those advisors from maintaining high-quality talent and services, not to mention being able to reinvest in the business to grow and scale.

In our 101st episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss the challenges advisors face in setting fees commensurate to their service offerings and the importance of charging sustainable fees to help businesses flourish.

As a starting point, it’s important to understand that staying competitive doesn’t necessarily mean advisors need to have the lowest fees. Many advisors have focused on obtaining deeper levels of expertise in broader areas and offering more in-house planning services in those areas (e.g., tax and estate planning) to differentiate themselves. Yet, in order to sustain these value-added services, advisors need to be able to offer competitive salaries to retain the talent responsible for providing them! Which is important, as salaries have become more transparent, enabling employees to find positions that will offer them the salary compensation they feel they deserve. However, advisors who feel obligated to keep their fees low but who also feel the need to continually add services to justify their fees often risk losing employees (especially the ones that are most talented!) and create more challenges for themselves to maintain ongoing success.

Importantly, reflecting on the quality and types of services they offer can help advisors identify the right (i.e., accurately comparable) industry benchmarks to compare themselves with, so that the fees they charge for the services they provide are in alignment with what they are actually worth. And advisors who offer premium services can justifiably ask for premium fees, which means it can be completely appropriate for firms that go above and beyond to adjust fees higher than what they may have been originally charging!

Ultimately, the key point is that advisors who offer above-average services should be compensated accordingly, which may require charging above-average fees. And while raising fees may feel scary for advisors who fear they may be asking for unreasonable prices, it can be worthwhile to consider that a small step increase of just 10% (e.g., asking for 1.1% AUM instead of 1.0%) can still yield a significant rise in revenue that would provide capacity for better services, talent, and tools. Many advisors join the industry to help clients achieve their financial goals, and by charging the right fees that are commensurate with their expertise and value, they not only position themselves to remain competitive, but they also ensure that they have the means to sustainably grow their businesses!

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As financial planning has evolved over the years, better tools have become available to help advisors maximize their impact with more clients by increasing their efficiency. Financial planning technology, in particular, has allowed advisors to automate time-intensive back-office tasks and delegate routine analyses to support staff, freeing up their time to engage more personally with clients. However, as advisor technology continues to evolve, many tools have focused on helping advisors scale their financial advice to accommodate growing businesses. And while these tools are marketed as helping advisors become more efficient, advisors often wonder if technology helps them offer better financial planning or if it simply serves to systematize outreach to more clients with depersonalized and less insightful advice.

In our 100th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss the evolution of advisor technology, how advisor technology has shifted the focus for many firms toward offering advice at scale by leveraging speed and efficiency, and whether advisor technology is truly helping make advisors better… or just faster.

As a starting point, it’s important to recognize that while conversations in the financial services industry over the last decade have entertained the idea that technology (e.g., robo-advisors) might someday replace human advisors, there are still many elements of financial planning that benefit from engagement with a human advisor. As while advisors certainly can leverage technology to create faster and more efficient back-office processes that help scale a growing practice, the key point is that new technology tools can also help advisors engage in better conversations through innovative presentation tools (e.g., interactive scenario modeling, data management, and visualization), helping them create more meaningful client relationships. And by aiming to scale the delivery of advice to make the process faster will not necessarily be better for clients, because the reality is that clients are humans with complicated histories and relationships with money; even though it may be more efficient to provide them with easy-to-use do-it-yourself financial technology to help them budget and track their own progress, many will still need extra time with their advisor to help them work through more complex issues preventing them from reaching their financial goals. And maintaining positive, supportive relationships with clients who are struggling to overcome emotional and behavioral challenges around money takes time.

Ultimately, advisor technology can help advisory firms scale their businesses by improving back-office efficiencies, but it does not necessarily serve to help financial advisors scale the work of actually giving financial advice… at least not yet. While the challenge of delivering advice at scale is perhaps better addressed through serving more clients by adjusting the firm’s business models instead of their chosen technology tools, there are technology tools available that can help advisors provide better advice by facilitating deeper discussions of the client’s unique situation, which can result in longer-lasting and more meaningful client relationships!

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For many financial advisors, prospecting efforts have traditionally been based on a perspective of scarcity, where the aim was to focus on connecting with and closing as many prospects as possible, regardless of their actual needs. However, in order to accommodate a wide range of clients with wildly diverse needs, firms often need to provide a myriad of services to address those needs. And this can mean developing a fee schedule with so many layers of complexity – to price out the range of all the services offered – that many prospects often end out too confused to understand what the advisor can actually do for them.

In our 98th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss how a scarcity perspective can result in a firm’s loss of focus by trying to accommodate any and all clients regardless of their needs. Instead, by conveying a clear and simple message to clients about how the advisor’s value can provide for a very specific type of client and their unique needs, advisors can enhance their business growth by attracting the right type of client while investing less time and fewer resources actively seeking out new prospects.

As a starting point, it’s important to understand that as the financial services industry has evolved into the digital age, it has become increasingly common for financial advisors to rely on web-based business development strategies where the typical number of ‘prospects’ who visit the advisor’s website are often astronomically large. Which means that nearly all advisors who have a website no longer have a shortage of prospects (as they can often rely on organic web traffic alone to bring thousands of visitors to their site); instead, the challenge has become one of attracting the right kind of prospect. And offering a message that will compel even just a small fraction of site visitors to engage in a relationship can lead to a substantial increase in business.

As individuals increasingly rely on the internet to find the right services to meet their needs, more clients are also seeking and engaging with advisors digitally. Which means that understanding the nature of how those visitors use and relate to their website (through website data analytics tools) can give advisors the tools to assess the efficacy of their marketing efforts. Some useful metrics to help advisors understand their visitors include the number of users and visitors, where they look for information, and session length. And monitoring these metrics over time can help the advisor ensure that their messaging is truly offering a clear, meaningful, and relevant value proposition to prospects.

Ultimately, the key point is that trying to cater to all clients out of fear of leaving opportunities on the table – and developing complex fee schedules to meet all of those clients’ needs – will generally only serve to dilute an advisor’s value proposition. But by recognizing that firms already have access to a wealth of prospects through their website, advisors can home in on attracting the right kind of prospects to grow the business without losing the focus of the firm!

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In recent years, politically charged topics have become the forefront of news and media, and with the rise of access to digitally distributed media, it has become commonplace for clients to have concerns about the possible impact of political events on their portfolios. These concerns have compelled many clients to reach out to their advisors, urging them to make changes in response to the political environment. And though clients may mean well, making changes to investments based on political events is often not a good idea for the long-term health of their financial plans, as well-designed portfolios are designed to safeguard against market turbulence that might result from those events. Importantly, political topics can often be emotionally charged and tied directly to a client’s core beliefs, which can make it challenging for advisors to convince their clients to stay the course and to reassure them they have an optimal portfolio strategy in place.

In our 97th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss how advisors can address clients who want to change their portfolio strategy in response to the political environment and offer ways to communicate with clients about how their current investment strategy is the most optimal plan.

As a starting point, it’s important for advisors to have a defensible portfolio strategy that they can explain to the client, walking them through the investment choices made and why they should stay the course. When having the conversation, listening carefully and empathetically to the client’s apprehensions to understand their motivation is key. Some clients may just want to express their fears to someone who understands their situation and is willing to listen, as the information they are reacting to may be scary for them and the outlook for their future. But when clients feel strongly about taking action to protect their portfolio, the advisor can continue the dialogue – after listening to the client’s concerns – by suggesting a step-by-step review of the financial plan and the client’s initial statement of financial purpose, giving the client and advisor an opportunity to review and reconfirm all the choices that have been made. This allows the advisor to present a logical case that the plan is solid, built to protect against market turbulence, and designed to meet the client’s stated goals. At the same time, this process allows the client to express their concerns and feel heard, and be reminded of the important financial goals they wanted their plan to help them achieve.

Ultimately, the key point is that when clients are overwhelmed with concerns about external events that can impact their investment portfolio, advisors have a valuable opportunity to support their clients and to help them understand how their financial plan is designed to meet their goals even in times of political turmoil. And as new issues arise between meetings with clients, listening and connecting with empathy can give advisors the chance to alleviate their clients’ escalating anxieties by reassuring them that their financial plan is still in a good place!

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When it comes to politically charged discussions, financial advisors generally try to stay neutral and focus on providing clients with objective financial advice. Yet, while they seek to remain apolitical in their financial advice, the shifting political environment has made it increasingly common for more clients to express their political concerns and feelings with their financial advisors. While many advisors want to remain neutral, the recurring conversations about politics can be stressful, especially when the client and advisor have opposing political viewpoints. This can make it increasingly difficult for the advisor to work with these clients.

In our 96th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss how to approach politically charged clients who may be difficult to work with, how to determine if a client’s fixation on their particular views interferes with the planning process, and, if needed, how to smoothly separate from clients and help them find a financial advisor that may be better suited for them.

As a starting point, it’s important to understand that for many clients who bring up politics, their concerns are often fleeting. If a client expresses serious concerns about politics and the potential effects it can have on their financial plan, the advisor may find it helpful to ask the client whether the subject can be put off until a later time so that the meeting can focus on the agenda at hand. If a client is adamant about their concerns, it may be a good idea for the advisor to perform a check-in to determine where their feelings are coming from. Some clients may be internalizing fears arising from what they see and hear in the media. These clients may just need someone to talk to, and the advisor can help by providing reassurance on the status of their financial plan.

However, there are other clients who may have a harder time letting go of their concerns, which can interfere with the work that needs to be done during the client-advisor meeting. If the advisor finds that working with these clients becomes increasingly difficult or stressful, it may be a good idea for the advisor to check in with their own emotional stress to understand whether the impact of the relationship is creating a strain on the advisor’s own mental health, and whether the strain is enough to warrant ending the engagement with the client. Importantly, if an advisor does determine that a client is not a good fit because of conflicting views, they can still approach the separation with compassion and empathy and part on good terms with the client by offering to find an advisor that is truly a better fit for them.

Ultimately, the key point is that not all clients may be a good fit for the advisor, and by understanding how to assess when they should terminate a client relationship, advisors can focus on giving all of their clients the best service possible – whether that means strengthening relationships with current clients or terminating relationships with unviable clients and guiding them to other resources that will support them. Because in the end, maintaining positive relationships is key to the financial advisor’s own success and mental health!

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